Shareholders to Benefit if Oil Companies Split off Shale Assets

Occidental Petroleum Corp. are considering a proposal to split its operations up into separate companies; a move that might actually prove enticing to other oil companies, and could potentially create an extra $100 billion in market value.

As well as Occidental, ConocoPhilips, Anadarko Petroleum Corp., and Talisman Energy Inc. are considering whether their traditional, global strategy is no longer effective in the face of the US shale boom, and whether in fact they would benefit more by splitting their US operations from the rest of their operations around the world.

Paul Sankey, an analyst at Deustche Bank AG, said that by separating low-cost investments in US shale plays from higher risk, but potentially higher reward, foreign assets, shareholders could unlock a huge, hidden bounty that will massively boost the over companies market value.

Over the past three years Cabot Oil & Gas Corp., a company that is based almost entirely in the Marcellus shale formation, has more than tripled in value; whereas Occidental, held back by foreign assets in Libya and Yemen, as well as other diversified investments, only grew by 7.3 percent.

David Neuhauser, the managing director at Livermore Partners Inc., explained to Bloomberg that “if you’re smaller, you can be much more dynamic by really focusing on your assets and growth.”

Doug Leggate, an analyst at the Bank of America Corp., estimates that if Occidental proceeds with its plans to split its domestic assets from international investments it could increase its current market value of $74 billion, by $47 billion.

If ConocoPhillips, Anadarko, and Talisman experienced similar results, than Bloomberg calculate that investors would have access to an extra $84 billion in market value.